Strategic or beneficial electrification provides a decarbonization strategy that transitions building (heating), transportation, and some industrial sectors away from direct use of fossil fuels (e.g., gas, oil, propane) toward electric-powered technologies (e.g., heat pumps, electric vehicles [EVs]). The process can also provide a range of other potential benefits, including reduced energy costs and usage, reduced air emissions and water use, improved health and safety for workers, and increased grid flexibility and efficiency. Strategic electrification is predicated on the assumption that the electric grid will become increasingly renewable with deployment of more solar, wind, and other renewable technologies. Electric utilities increasingly explore opportunities presented by strategic electrification to achieve various objectives, including compliance with greenhouse gas (GHG) reduction requirements, creation of growth opportunities (i.e., by increasing the electricity load), reduced delivery costs to ratepayers (by spreading fixed costs across more kWh), and posing the potential to offer new services to customers. Utilities face, however, several significant challenges related to strategic electrification. These include unclear market growth rates, lack of clarity regarding grid impacts, unproven business and investment models, uncertainty regarding allocation of benefits and costs across customer classes, and political and regulatory uncertainty.
This paper presents case studies of Northeast and Northwest utilities, and describes opportunities and challenges for utilities as they relate to strategic electrification. While the paper touches on issues impacting the transportation and building (thermal) sector, it focuses especially on building electrification. It considers key market drivers of strategic electrification, challenges that utilities face, and explores implications for the utility business case. Finally, this paper also provides an overview of strategic electrification objectives and implications from policy and regulatory perspectives.
This paper was presented at the ACEEE Summer Study on Energy Efficiency in Buildings Conference in August 2018.
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